Page 150 - Budgeting for Managers

Budgetary Spending
Authorizing Your Team to Spend Money
In some accounting systems, the accounting department com-
puter system tracks who approves each purchase order or
check. You may want to approve each expense yourself or you
may want to delegate authority to members of your team, to 133
allow them to make certain purchases without checking each
one with you.
Spending at the Beginning and the End of the Year
Several issues come up when we want to spend money at the
beginning and the end of the fiscal year. One we already dis-
cussed is blackout periods—times when funds may not be
available, even though they’ve been allocated. In addition, we
need to pay attention to a few other factors:
• If the final budget approval is delayed, funds may not be
available at the beginning of the year.
•In most companies, money not used by the end of the
year is no longer available—it doesn’t carry over into the
next year.
•Although it’s not a good business practice, many busi-
nesses figure that if you don’t spend your entire budget
within one year, then you’ll need less money next year.
These fiscal policies can lead to a number of poor manage-
ment practices. Departments may rush to spend money at the
end of each fiscal year, either because the policy is use it or
lose it or because they don’t want next year’s budget to be
trimmed. These rush purchases are often unwise. Similarly, if
accounting departments are unreliable in guaranteeing funding
later in the year, departments may rush to spend early, even if
that’s not optimal for the workload and the management of
work and money for the company.
These poor management practices are different from a gen-
uine effort to handle a seasonal business that has ups and
downs in available cash. It makes sense to schedule purchases